2005 Business jet survey

The Middle East business jet market is maturing quickly, but there is still demand for more aircraft in the region.

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By  Neil Denslow Published  May 5, 2005

|~||~||~|The last 12 months have seen strong developments in the region’s business jet sector, with more operators entering the market, more aircraft becoming available for chartering and more demand for aircraft management services. There are still challenges in the local market, notably the lack of financing for new planes and limited FBO facilities in some parts of the region, but generally the picture is of strong growth and improving market conditions. The strength of the Middle East business jet charter market is drawing in new operators and encouraging existing players to ramp up their fleets. The first Aviation Business business jet fleet survey, the data for which was provided by Airclaims, shows a number of operators that have recently received aircraft or which have outstanding orders. Among the most active, for instance, is Abu Dhabi-based Royal Jet, which has two Challenger 300s on order, with one due to enter service next month, and plans to take another BBJ from the UAE Amiri Flight by the end of the year. The company is also expecting to soon expand its fleet by taking on aircraft under management as well. “We are discussing [management] with several customers who are interested in buying their own private jets, which might include another Challenger 300 and probably a GV, hopefully this year,” comments Ammar Balkar, vice president, sales & marketing, Royal Jet. Other business jet operators in the region have also been expanding their fleets. Qatar Airways, for instance, ordered a Challenger 300 for the Qatari Amiri fleet at last year’s Farnborough air show, while ExecuJet Middle East recently took delivery of a Challenger 601 (see p. 18). ExecuJet, which represents Bombardier in the local market, also reports strong sales having placed four aircraft in the last 18 months, and it is predicting more to come. “I see more people buying Global Expresses soon, especially Global 5000s,” predicts Khader Mattar, sales director, ExecuJet Middle East. “There will be further growth in the market to come, as the requirement is definitely there,” he adds. The growth in the market is being driven by a combination of factors, including the high price of oil, greater political stability and the general economic growth in the region. These factors are driving up business and competition across many sectors in the region, which is encouraging local operators and owners to invest in aircraft. “You will see many more Western companies coming here to invest, which will help our business tremendously,” comments Mattar. “These companies have learnt that in the Middle East, opportunities come and go very quickly, so you have to capitalise on them in a very short time,” he adds. “As such, we are now noticing that a lot of businessmen like to go and come back the same day.” Operators in the Middle East are also benefiting from strong demand for long-haul flights as well. Traditionally, this has tended to mean America, however, demand is actually now much stronger from the East, particularly from Russia. “A lot of people think long range is the States, and nobody thinks about Russia and the Maldives, which are the same time away,” says Mattar. “However, the Russians love our aeroplane… and they have been using it very extensively.”||**|||~||~||~|Royal Jet has also made several charter flights out of Moscow this year to Dubai and the Seychelles among other destinations, and it is also targeting further growth there. “This is a new and potentially huge market,” says Balkar. “They love widebody aircraft rather than small or short-range types, and this is to our advantage as we operate BBJs and we will soon be operating a private GV… They would also prefer to use Western aircraft rather than Russian ones,” he adds. The demand for charter flights in the Middle East is also drawing in new operators, which is increasing the supply of aircraft in the local market. Elite Jets, for instance, has recently brought a Beechjet 400A to Dubai, and it has plans to add a Hawker 1000 and a Falcon 900B, as well. “There is [more than] enough business to go around, and, in my opinion, there are simply not enough aircraft for the demand in this industry at present,” comments Paras Dhamecha, CEO of Elite Jets, which also represents Raytheon Aircraft locally. Bangladesh’s IPSSL Group has also set up an office in Dubai to tap into the local market. However, it has postponed plans to base an aircraft here because of the demand in its home market. “We are concentrating on Southeast Asia and our market there is pretty big, so we cannot spare any aircraft at the moment,” says M. Haider Uzzaman, chairman, IPSSL Group. However, the entrance of operators and more aircraft into the region is being held back, particularly because of financing. Essentially, the regulations in the Middle East mean that mortgages on aircraft are not recognised, which understandably makes local banks reluctant to make loans for planes. “The banks are aware of [the problem]…. and we have come up with a couple of structures that are workable and we have secured a couple of deals,” says Mattar. “However, I think we still have a lot of work to do in educating the banks… and the local authorities really have to look at their regulations in terms of the ownership of aircraft,” he adds. Royal Jet was able to secure financing for its first Challenger from a local bank, Gulf First, and it is now looking to use the same structures to get deals for its customers. “It took quite a while for us to educate the financing system and how we were going to do it, but now we have done it, we can pass it onto our customers,” says Balkar. “The arrangement is a straight mortgage, but Royal Jet is involved in granting the loan,” he explains. “We have a very good financial structure in place, and they [the banks] will be willing to finance other people, provided that Royal Jet will act as the guarantor. It is a major advantage for us.” Of course, for many clients in the region financing is less of an issue, which has helped the private aircraft market get as big as it has, especially in Saudi Arabia. The country dominates the region’s fleet at present, but operators and vendors still see opportunities for more sales. This is partly through replacement sales for the country’s ageing fleet, but also through an increasing use of management services, which make owning and operating an aircraft a simpler and more cost effective proposition. “We have received several requests [for management] from Saudi Arabia... [and] I think there is a lot of potential business there,” says Balkar. “We will witness a boom in the next five years,” he predicts.||**||

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